Sony BMG Music has reached a preliminary settlement with the Federal Trade Commission (FTC) over its use of hidden copy-protection in music CDs. Sony has agreed to let customer exchange their affected CDs and receive up to $150 for damages. While the total damages could be huge, Sony seems to have escaped a bullet and has dodged any direct FTC fines.

Customers who purchased the CDs before December 31st, 2006 will be allowed to exchange the CDs until June 31st, 2007. The same customers can apply for up to $150 in compensation for damages caused by the copy protection.

In an effort to stop music piracy, Sony started selling music CDs protected by DRM (digital rights management) software. According to some security analysts, the software was hard to uninstall and opened security vulnerabilities.

The FTC is also barring Sony from installing or hiding overly intrusive content protection software on music CDs. Sony can still protect its music, but must inform the customer and must provide uninstall tools on its website.

The FTC will hold public hearings about the settlement until March 1st. Afterwards it will make a final decision.

Related Article

Sony’s DRM disaster : A chronology of events